Q&A: NAFTA’s role in US oil and gas

By North American Shale magazine staff | October 20, 2017

With two rounds of negotiations over the North American Free
Trade Agreement completed and a third round scheduled for
Sept. 23-27 in Canada, what are the potential consequences for
the U.S. oil and gas industry?

President Donald Trump has the power to withdraw the U.S. from NAFTA and has threatened to do so. But in August, the American Petroleum Institute, the Canadian Association of Petroleum Producers and the Mexican Association of Hydrocarbon Companies released a joint paper outlining their shared policy positions on NAFTA.

Two trade experts who cofounded Monarch Global Strategies LLC—a consulting firm that advises companies conducting business in the Americas—provided North American Shale Magazine with their insights on what NAFTA means to the U.S. oil and gas industry and energy infrastructure.

James R. Jones, MGS chairman—a former U.S. ambassador to Mexico during the Clinton administration and former congressman from Oklahoma—played a role in implementing NAFTA. He now focuses on international trade, investment and commerce, business-government relations and financial services. Michael Camuñez, MGS president and CEO, served as an assistant commerce secretary for market access during the Obama administration. He advises U.S. companies in domestic and global markets.

Has the U.S. shale revolution caused America’s energy industry
to rethink how it views NAFTA? If so, why?

Mexico has become a major client for American energy companies: they are now supplying more than 80 percent of Mexican natural gas. Mexico also imports a lot of shale oil—the super lightweight crude Mexico needs to mix with its super heavy Mayan crude. I think it’s fair to say that Mexico is now viewed not only as a critical export market but also a strategic market generally for the development of new shale and other energy resources essential for North American energy independence.

What was your reaction when the American Petroleum Institute,
the
Canadian Association of Petroleum Producers and the Mexican
Association of Hydrocarbon Companies released a joint paper
outlining the shared policy positions they support on NAFTA?
First, the issuance of a joint statement reflects the significant consensus in and deepening of the North American energy industry, something that might not have been conceivable in years past. We welcome the thoughtful and inspiring position paper. The “Do no harm” and “Trilateral NAFTA” principles advanced by the papers should be kept strongly in mind by U.S. negotiators during the talks.

How might the U.S. oil and gas industry’s support for NAFTA cause
the Trump administration to rethink
its position on the trade
agreement?

One of Trump’s main reasons for revisiting NAFTA is the U.S.-Mexico trade deficit. But the U.S. oil and gas industry is actually benefiting enormously by Mexico’s postponement of opening the energy markets to private participation: Mexico imported $5.45 billion dollars just in fuels in the first five months of 2017, mostly from the U.S. In 2016, U.S. companies exported natural gas for almost $4 billion dollars to Mexico. From an energy perspective, the U.S. has as large a trade surplus ($11.5 billion USD) with Mexico. In 2016, the total value of U.S. energy exports to Mexico was $20.2 billion, while the value of U.S. energy imports from Mexico was $8.7 billion.